The Nordic countries have a long tradition of collaboration to ensure sufficient and stable energy supply and optimal utilization of the different countries’ energy resources.

On December 2-3, Copenhagen was the venue for Nordic Energy Cooperation 2010, whose objective was to evaluate the current status of the cross-border energy systems, discuss the need for further development of the Nordic grid and its legal environment, and assess the challenges involved in integrating renewable energy in the system.

A well-functioning Collaboration
Flemming G. Nielsen, Director at the Danish Energy Agency, has been chairman of the Nordic Electricity Market Committee since 2004. He explains that the Nordic collaboration in the area goes a long way back, but that it was formalized by the Nordic Council of Ministers with the Louisiana-statement in 1995.

”The Nordic energy markets either had been or were being liberalized at the time and the Nordic Council of Ministers expressed political will to further develop the open Nordic electricity market. Later the Nordic Ministers put forward a new vision for the cooperation, where the main focus was on expanding the transmission grids across the borders and harmonizing the legislation to ensure a flexible and effective market,” Flemming G. Nielsen says.

The common Nordic energy market has advanced considerably since then with regards to infrastructure, legal framework and commercial efficiency. “2004 was an important milestone. The Nordic collaboration of Transmission System Operators, Nordel, decided to reinforce the system with five significant sections, Fenno-Skan between Sweden and Finland, Nea-Järpströmmen between Norway and Sweden, Skagerrak between Norway and Denmark, Storebælt in Denmark and the Hallsberg-Scandia connexion in Sweden,” Nielsen continues.

Because of the collaboration’s early start and progressive development, the borderless Nordic energy market has become a valuable asset for the Nordic countries, both internally and in a European context.

Energy Exchange on a Daily Basis
If an energy deficit occurs in one of the Nordic countries, the system either facilitates an exchange of surplus energy or increases production in a neighbouring country to meet the demand. As an example of the advantages of the interconnected system, Flemming G. Nielsen describes the energy exchange between Denmark and Norway.

“Denmark has for many years bought electricity from Norway during the day and sent electricity back during the night. This balances the production patterns in Denmark and Norway is capable of holding back the water in their magazines during the night, which means that we do not tap into the energy resources any more than necessary,” Nielsen continues.
Additionally, the system shows its value when operational disturbances occur. Examples of this were presented at the conference, i.e. a cold winter period in Sweden, where energy generation was at an all-time low because of nuclear power plant maintenance and low water levels in Swedish rivers.

Two scenarios related to wind energy were also mentioned, one where winds of over 25 metres per second brought windmills in Denmark to a halt, suddenly creating a production plunge of more than 2000 MW, and another, where lack of wind led to a substantial energy deficit in Denmark and Germany. In all cases, the Nordic cross-border system reacted successfully and secured electricity supply in the affected countries.

Price Areas for a flexible and competitive Market
One of the goals defined by the Nordic Council of Ministers was creating a flexible, competitive market that reacts effectively to variations in supply and demand. To accomplish this, the Nordic countries have been divided into different price areas that reflect the relationship between transmission capacity and energy consumption.

“Where capacity problems or bottlenecks in the transmission system limit the flow of electricity between two areas, the price in these areas should differ. Where the production capacity is low in comparison to consumption, the price should be higher, says Flemming G. Nielsen.

Nielsen explains that the price area strategy has been on the Nordic agenda for many years and that considerable progress has been made.
“Denmark is divided into two price areas and Norway has 4-5 areas, whereas Sweden until recently wanted to offer all consumers the same electricity price. Sweden is now prepared to change this policy and divide the country into price areas, so we seem to have found a solution that suits everybody, says Flemming G. Nielsen.

Removing Legal Obstacles
An important part of the Nordic energy collaboration is working towards a harmonized legal framework to make network investment across the borders feasible. Jon Sagen from NordREG, the Nordic Cooperation of Energy Regulators, presented the main results of ‘Grid Investments in a Nordic Perspective’, a report that mapped and analyzed legislation and licensing issues for Nordic grid investments and ways of financing common network investment projects.

Sagen stated that there was an important development in European electricity regulation, network planning and investment. He stressed the importance of further Nordic investment planning, in accordance with the European plans, but with main focus on the Nordic socio-economic benefits.
“Nordic network planning and Nordic common projects have been quite successful, but there are still aspects where improvement is possible. Each country’s acts and regulations are still primarily nationally oriented and do not necessarily take into account the Nordic perspective,” Sagen said in his presentation.

According to the report, the investment regulation needs to be further harmonized and all obstacles for participation in network infrastructure projects in other Nordic countries removed. Further to that, the development of a financing model that is able to balance national costs and benefits should be prioritized, in order to encourage Nordic cross-border investment.
Challenges of the future

The main theme at Nordic Energy Cooperation 2010 was how to meet the various challenges related to the integration of renewable energy in the Nordic transmission grid. Read more about this in the article ‘Integrating Renewable Energy in the Nordic Grid’.

By Páll Tómas Finnsson

 Further information about the conference.